Submission – Compensation Scheme of Last Resort: Application of the waterfall framework for the 2026–27 special levy
The Super Members Council welcomes the opportunity to provide feedback to the application of the CSLR waterfall framework for the 2026-27 special levy. Events like the devastating collapses of Shield and First Guardian must never happen again. Almost 12,000 Australians lost an estimated $1.2 billion of their life savings through a chain of misconduct and failed safeguards. These were not isolated events. The largest costs borne by the CSLR have repeatedly originated from the same business model: firms that channelled clients into related-party or high-risk managed investment schemes. Dixon Advisory, United Global Capital, and Shield and First Guardian together account for $147 million, or 87 per cent, of the 2026–27 compensation costs. The CSLR waterfall is intended to allocate excess costs once the annual levy cap has been reached. Although the Government describes this mechanism as risk-based, put plainly: it is not.
The result of the Government’s latest proposal would be to force everyday Australians who are members of safe, mainstream super funds – including most of the nation’s lowest-paid workers – to pay a compensation bill for failures arising in unrelated high-risk financial services. A credible CSLR funding model must be genuinely risk-based. SMC cautions against the Government spreading such losses across the broader financial system without applying a proper risk-based framework. Tiers 1 and 2 should allocate costs according to proximity and connection to the underlying harm. Tier 3 should operate only as a genuine residual backstop once those sources have been fully and appropriately exhausted. This latest proposal does not maintain that distinction and instead moves too quickly to broad cost-spreading.
SMC’s recommendations apply one principle throughout: the CSLR should allocate costs according to proximity to consumer harm and capacity to prevent or mitigate that harm, rather than shifting losses onto millions of Australians with modest amounts of super.
